Energy Stocks Hit in Asia as Oil Sinks, Dollar Weak
Energy firms sank in Asian trade on Tuesday (Aug 23) as oil prices extended the previous day’s sharp losses due to profit-taking after a recent rally and fresh worries about a global oversupply.
Even a fall in the dollar, which usually makes crude cheaper, could not stop the slide in the commodity after Iraq flagged a pick-up in output and rebels in key producer Nigeria announced a ceasefire.
Investors were also treading water as they await a key speech from Federal Reserve boss Janet Yellen, hoping for some insight into the state of the US economy and the bank’s plans for its next interest rate rise.
After a seven-day rally that put oil into a bull market – a 20 per cent jump from recent lows – the commodity has taken a hiding since the start of this week.
In afternoon trade on Tuesday West Texas Intermediate fell one per cent to US$46.96 and Brent lost 0.7 per cent to US$48.84.
On Monday WTI shed 2.9 per cent and Brent 3.4 per cent after Iraq signalled a likely increase in output from Kirkuk’s oil fields under a deal between the region and the country’s new oil minister.
At the weekend the Niger Delta Avengers announced a conditional ceasefire and agreed to hold talks with the government following months of attacks on oil and gas facilities.
The two developments follow a surge that helped Brent last week break above US$50 for the first time since early July. Analysts warned of further drops.
YELLEN IN FOCUS
“We’re seeing a bit of profit-taking,” Ric Spooner, chief analyst at CMC Markets in Sydney, told Bloomberg News.
“It’s about how far the price had climbed in relation to the current underlying fundamental situation. There is still plenty of supply around. It wouldn’t be surprising to see this downtrend continue and it’s possible we could see some sort of basing around US$44-US$45.”
Among energy firms, Japan’s Inpex and JX Holdings each fell more than two per cent, while in Hong Kong CNOOC shed more than one per cent and PetroChina 0.6 per cent. Sydney-listed Woodside Petroleum eased 0.4 per cent.
On regional stock markets, Tokyo’s Nikkei finished 0.6 per cent lower, while Hong Kong was flat. Shanghai added 0.2 per cent and Sydney closed 0.7 per cent higher while Seoul tacked on 0.4 per cent.
In early European trade London and Paris each rose 0.4 per cent and Frankfurt added 0.5 per cent.
The dollar fell below ¥100 again despite weekend comments from Fed vice chairman Stanley Fischer, which fanned speculation of an interest rate rise before the end of the year. They were followed by similarly hawkish noises from two regional bank presidents.
The greenback fell to ¥99.94 at one point in Tokyo. It later edged back to ¥100.07 from ¥100.32 in New York, while it was also down against most high-yielding currencies including the Australian dollar and South Korean won.
Observers expect markets to remain cautious leading up to Yellen’s speech at the annual global central bankers’ symposium at Jackson Hole in Wyoming Friday.
The speech “remains the headline event this week and I think we could continue to see an element of caution in the markets in the lead-up to this”, Craig Erlam, senior market analyst at OANDA, said in a note.
“Investors are still not buying a 2016 rate hike, even following Stanley Fischer’s comments over the weekend. The only question is whether (Yellen will) strongly hint at a hike this year or indicate that holding off to early next year may be warranted.”
– Key figures at 0800 GMT –
Tokyo – Nikkei 225: DOWN 0.6 per cent at 16,497.36 (close)
Shanghai – Composite: UP 0.2 per cent at 3,089.71 (close)
Hong Kong – Hang Seng: UP 1.02 points at 22,998.93 (close)
London – FTSE 100: UP 0.4 per cent at 6,855.94
Euro/dollar: UP at US$1.1331 from US$1.1322 Monday
Dollar/yen: DOWN at ¥100.07 from ¥100.32
Pound/dollar: UP at US$1.3162 from US$1.3137
New York – DOW: DOWN 0.1 per cent at 18,529.42 (close)
Courtesy : channelnewsasia.com
